The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.” War Over The South China Sea

A War Over The South China Sea?

The current U.S. policies are threatening the start of another Cold War, this one to include China. Such things are always a failure of diplomacy. Perhaps if our policy makers in Washington had gone to a European school, they would know something about world history. The last secretary of State of the U.S. who knew history was Kissinger. That was almost 50 years ago.

Recently, the U.S. had a big naval ship going through the South China Sea claimed as Chinese territory. Apparently, the U.S. wanted to make the point that this was international territory.

Here is what the PEOPLE’S DAILY, the China government’s publication, had to say:

China will never allow US to run amok in South China Sea: People’s Daily

A US Navy guided-missile destroyer, the USS Decatur, sailed through Xisha Island waters, part of the South China Sea as Chinese territorial waters, on Friday without the approval of Chinese authorities. The Chinese government resolutely opposes such provocative behavior and will take a series of effective counter-measures.

In the statement of the Chinese government on the territorial sea baseline issued in May 1996, China clarified the baseline of the Xisha Islands. The Law of the People’s Republic of China on the Territorial Sea and the Contiguous Zone and other international laws also stipulates that all foreign warships need to gain approval from the Chinese government before entering Chinese waters.

The illegal entry of US warships into Chinese waters without permission seriously violates China’s sovereignty and security interests, breaches both Chinese and international laws as well, and poses threats to peace, security as well as order in the relevant waters.

The president-elect will not shy away from “brinkmanship.” That’s not a bad word. It’s what toppled communism in Soviet Russia when President Reagan announced a program called “Star Wars.” It was a clear deception because the technology wasn’t at that point yet. But Reagan’s people made it look very real. The Soviets believed it, and basically bankrupted themselves trying to develop a similar program.

With China now in very poor financial condition, with so much capital rushing out of the country, a deep recession in China is possible. Is that why they are so energetic in fudging the economic growth numbers? Rising unemployment, riots in the streets, hungry stomachs, will make China vulnerable. Trump’s hint that it is time for the U.S. to increase its nuclear capability may be the equivalent of “Star Wars.”

We can only hope it won’t turn into a real war. The entire population of the U.S. is somewhat over 315 million. To lose just half of those lives would be catastrophic. For China to lose that many would merely be “house cleaning.”